Bill Description: House Bill 177 would substantially increase a redistributive state income tax deduction for dependent care.
Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?
State and federal tax policy subsidize dependent care through targeted deductions and credits. In Idaho, the primary deduction for dependent care is limited to a percentage of expenses incurred, with a maximum of $3,000 for one child or $6,000 for two or more children.
While this deduction is available to someone who cares for a dependent adult with disabilities, it primarily applies to child care expenses for children age 12 and younger.
House Bill 177 would amend Section 63-3022D, Idaho Code, to increase the maximum deduction to $12,000 per taxable year. The fiscal note for the bill estimates the cost of this increase at "up to $4 million per tax year."
While tax reductions that apply to most or all taxpayers are viewed very favorably, the use of tax policy to provide special deductions, credits, and carve-outs to a small subset of taxpayers is a redistribution of wealth.
It is also worth noting that providing substantial tax benefits for specific behaviors or purchases (such as child care services) constitutes government intrusion into the market. It also inserts government into decisions about family life, shaping the cultural landscape. That is because these policies incentivize specific choices and behaviors as opposed to others. A family that chooses to outsource some of its parenting responsibilities should not receive a tax advantage over a family that chooses to care for its children at home.